Affected customers will be contacted
RBS tells watchdog it ‘fell below standards’ in bungled loan selling
Under the Enterprise Finance Guarantee the government underwrote 75% of a lender’s offer to a small business lacking the usual security.
But some customers were incorrectly led to believe that the guarantee was for their benefit rather than the bank’s – and did not realise that they remained liable for 100% of the loan. In a number of cases they only discovered this when they defaulted.
The bank said it was committed to the scheme – it was the biggest user of it – and said it had helped thousands of businesses get through difficult situations.
A newspaper inquiry uncovered the issue last year and it was understood to be linked to deputy chief executive Chris Sullivan’s departure before Christmas.
RBS admitted that it had fallen below standards in processing these loans and said any customers affected would be contacted directly by the bank. A helpline would be available to those with concerns.
The bank said it would ensure that “neither our customers nor the Government are adversely impacted by the issues identified” indicating that taxpayer money claimed inappropriately as a result of the mis-selling would be returned.
While the issue is another embarrassment for the bank, it believes the likely impact on it will be small as it will already have accounted for firms who defaulted, typically having never recovered more than 25% of their loan.
The Financial Conduct Authority confirmed that it had been made aware of the issue and said it would remain in dialogue with RBS during its review.